21 September 2007

RBC Fires Bond Salespeople in `Challenging Market'

Bloomberg, Caroline Salas, 21 September 2007

RBC Capital Markets, the investment-banking arm of Canada's biggest bank, is firing employees in its U.S. fixed-income division as a slump in credit markets curbs revenue on Wall Street.

The Toronto-based bank reorganized its U.S. fixed income unit "in the face of challenging credit markets," Chuck Powis, head of U.S. fixed-income sales in New York, said in an e-mail to clients this week that was obtained by Bloomberg News. "This reorganization involves changes that we feel are necessary to better align our business to these volatile markets." The e-mail didn't refer to job reductions.

RBC cut 40 fixed-income sales positions and may close its Fort Lauderdale, Florida, office, people with knowledge of the reductions said. Powis confirmed the contents of his e-mail. He wouldn't discuss the job reductions.

Bond traders in the U.S. are losing or leaving their jobs as losses sparked by defaults on subprime mortgage securities spread throughout the credit markets.

Royal Bank of Scotland Plc's RBS Greenwich Capital unit ``resized'' a department that deals with collateralized debt obligations, according to an e-mailed statement last month. Merrill Lynch & Co. said last week that Kenneth Margolis, 53, a managing director who helped oversee its CDO underwriting business, left as sales of the securities tumbled.

Kevin Foster, a spokesman for RBC, wouldn't comment on the firings and declined to say how many salespeople remain employed by the U.S. fixed-income unit.

``We have made some changes to our operations -- this is a strategic response to changing opportunities in the U.S. fixed income market,'' Foster said in an e-mailed statement. ``Our fixed income and currency business is not experiencing a significant change in business performance.''

As investors fled to government debt, more than 50 companies postponed or reworked bond sales in June, July and August, and demand for mortgage securities dried up.

Bear Stearns Cos., the securities firm hit hardest by the collapse of the mortgage market, yesterday reported its third- quarter net income dropped 61 percent, the New York-based firm's biggest profit decline in more than a decade. Morgan Stanley and Lehman Brothers Holdings Inc., both based in New York, also posted declines.

As part of the changes, RBC this week named Powis, 44, head of sales after previously serving as head of U.S. structured credit and rates at RBC. Mike Quinn, 42, was also appointed head of U.S. credit trading and remains co-head of structured credit, financial products.

RBC, a unit of Toronto-based Royal Bank of Canada, elevated Powis and Quinn after the departures of sales chief Brian Shapiro, head of high-grade trading Stuart Alper and Robert Lambert, who ran high-yield trading. Lambert quit to join Harbinger Capital Partners.

``We remain committed to building a top tier fixed income business globally with a significant presence in the U.S. market,'' Foster said in the statement.